Abstract:

The perennial controversy in business combinations accounting and its dialectic with stakeholders’ interests under the complexity of the Mergers and Acquisitions (M&A) activity is the centrepiece of analysis in this thesis. It is argued here that the accounting regulation should be as neutral as possible for the economic activity, although it is recognised that accounting changes may result in economic effects. In the case of the changes for business combinations accounting in the USA, lobbying was so fierce that in order to achieve the abolition of accounting choice in M&A accounting, it forced the standard-setter to compromise and to change substantially some of its earlier proposals. Such fierce lobbying cast doubts about whether it was effectively possible to mitigate such economic effects, resulting in a possible impact of the accounting changes on the M&A activity.
The occurrence of M&A in waves is yet to be fully theorised. Nevertheless, existing literature established relationships between M&A activity and some key economic and financial factors, and has provided several interesting theories and other meaningful contributions for this thesis. It was therefore possible to examine whether the changes in the accounting rules produced any significant impact on the M&A activity.
The findings obtained from the testing of the research hypotheses suggest that the new M&A accounting rules did not result in significant impacts on overall M&A activity. Nevertheless, from the study of managers’ perceptions, and from the examination of annual reports of S&P 500 companies, a considerable impact on the financial reporting was found.